House Democrats introduce SBA reform bill

The Democrats on the House Small Business Committee proposed reauthorization legislation today that would overhaul the Small Business Administration. The bill would increase the federal government's small-business prime contracting goal from 23 percent to 30 percent.

The Empowering the Next Generation by Investing in the Nation's Entrepreneurs Act also would reduce the cost of SBA's 7(a) loan program, its largest, long-term lending program.

The cost to entrepreneurs of taking out 7(a) loans has doubled, said Rep. Nydia M. Velazquez (D-N.Y.), who noted the proposed legislation would make such loans more affordable to entrepreneurs. A provision in the new legislation would set aside funds appropriated for the program to go toward lowering 7(a) fees, a source familiar with the legislation said.

SBA was flooded with disaster-loan requests in the wake of the 2005 hurricane season. The proposed legislation would establish an associate administrator of disaster planning within SBA specifically to oversee the agency's response.

Private financial institutions also would be allowed to assist in processing and distributing disaster loans, which SBA came under fire for being slow to process in the wake of Hurricane Katrina.

Further, the committee's proposed legislation would require SBA and the Federal Emergency Management Agency to establish joint guidelines for coordinated disaster assistance programs. Terms of the legislation call for disaster recovery contracts to go, at least in part, to small companies in the affected area, Velazquez said.

The legislation also would attempt to prevent large companies from winning small-business contracts by requiring an annual report from SBA's Office of Advocacy on contract miscoding. The committee also proposed increasing penalties for companies that falsely certify themselves as small businesses, the source said.